The Association between Dividend Payouts and Firm Growth: Australian Evidence
43 Pages Posted: 16 Feb 2021
Date Written: December 16, 2020
We report that whereas firms with high earnings distributions tend to have low to moderate growth (consistent with conventional theory), firms with low earnings distributions run the range between high and low performers. We interpret our findings for firm growth and payout policy in relation to the firm’s location on the Boston Consulting Group (BCG) matrix that combines high/low growth with high/low market share. Our findings suggest that the market has difficulty in distinguishing between these types of firms. A concern is that investor preferences as an outcome may be focused on dividend-paying firms at the expense of younger growing firms in need of retained earnings.
Keywords: Dividends, Firm growth, Dividend payout, Boston Consulting Group (BCG), matrix firm cycle
JEL Classification: G10, G11, G12
Suggested Citation: Suggested Citation